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US stocks tumbles with commodities

Silver and oil tumbled more than 2 per cent to lead the Standard & Poor's GSCI Index of commodities to its biggest decline in almost six weeks amid speculation a hedge fund was selling positions. US benchmark stock indexes fell from five-year highs and New Zealand's dollar weakened.

Oil futures tumbled 2.2 per cent to $US94.56 a barrel and silver lost 2.8 per cent as of 1:14 p.m. in New York. The Standard & Poor's 500 Index slipped 0.5 per cent. New Zealand's dollar, the so-called kiwi, depreciated 1.2 per cent to 83.63 US cents as the central bank said it's ready to influence the currency's exchange rate. The pound slid 0.9 per cent to $US1.5287 as Bank of England minutes showed a growing number of policy makers backed expanded asset purchases.

Stocks were little changed earlier as investors awaited minutes from the Federal Reserve's last meeting to gauge the outlook for monetary policy. Eighteen of the 24 commodities tracked by the S&P GSCI Index retreated, sending the gauge down 1.2 per cent in its biggest loss on an intraday basis since Jan. 11. Gold futures sank 1.4 per cent to $US1,581.80 an ounce, the lowest since July.

"There is a rumor that a fund is blowing up," Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said in a telephone interview. Schork has spent 17 years in physical commodity and derivatives trading including stints at Glencore Ltd. and Novarco Ltd., Marc Rich's last venture in the global energy trading, and his clients include OPEC and major oil companies. "Metals are getting hit and it's spreading over to oil."

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Valuation Watch

The S&P 500 climbed to the highest level since October 2007 yesterday and ended the session trading for 15.1 times reported earnings, the most-expensive level since July 2011.

The benchmark gauge of US equities is less than 3 per cent below its record high and is up about 7 per cent in 2013, beating a 4.5 per cent gain in the MSCI Asia Pacific and a 3.4 per cent rise in the Stoxx Europe 600 Index.

"The market has moved too far," Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. His firm oversees $US20 billion. "We need to take a breather. Even good, solid economic reports are probably not living up to the expectations. It doesn't mean that we'll see a selloff. Yet we'll probably move sideways."

Housing Data

An S&P gauge of homebuilders lost 4 per cent as all 11 stocks retreated. Work began on 613,000 one-family houses at an annual rate last month, the most since July 2008 and up 0.8 per cent from December's 608,000, Commerce Department figures showed today. Total housing starts dropped to a 890,000 rate, less than forecast and restrained by a slump in construction of multifamily units.

Treasury 10-year note yields fell one basis point to 2.02 per cent, retreating from near the highest level in 10 months, before the Fed releases minutes of its last policy meeting.

"The Fed minutes is certainly the primary driver," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. "We're looking for the Fed to talk a little bit more about the downsides of their very expansionary monetary policy. The short-term data will take second seat to the Fed."

About three shares gained for every two that fell in the Stoxx Europe 600 Index, even as the gauge retreated 0.3 per cent. Lafarge SA rallied 5.5 per cent in Paris as earnings beat estimates and the world's biggest cement maker said it'll meet most of a cost-cutting goal one year early.

RSA Insurance Group Plc sank 14 per cent for the largest drop in more than four years as the U.K.'s biggest non-life insurer by market value cut its dividend by 33 per cent. Deutsche Lufthansa AG declined 6.2 per cent as the German carrier suspended its dividend for the first time since 2010.

German Auction

Germany's 10-year bunds declined for the first time in three days, sending yields up three basis points to 1.65 per cent, as demand fell at a 5 billion-euro ($US6.69 billion) auction of the euro-region's benchmark securities. Portugal's debt rose, sending 10-year yields down two basis points to 6.19 per cent, after the nation sold 1.5 billion euros of three- and 12-month bills.

The cost of insuring against default on debt of Royal KPN NV fell to the lowest in two weeks, with credit-default swaps dropping 11 basis points to 162 after shareholder America Movil SAB, the carrier controlled by billionaire Carlos Slim, agreed to support a 4 billion-euro ($US5.4 billion) capital-raising plan. KPN stock sank 9.7 per cent.

Kiwi Intervention

New Zealand's kiwi dollar surged about 45 per cent against the dollar since the end of 2008, the biggest advance after its Australian counterpart among more than 150 currencies tracked by Bloomberg. The kiwi lost as much as 1.3 per cent today, the most since Dec. 21.

New Zealand's Reserve Bank Governor Graeme Wheeler said today in Auckland that he's "prepared to intervene to influence the kiwi" and that the currency isn't a one-way bet.

"It's interesting that the RBNZ have upped the rhetoric around the potential for intervention," said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. "This is the first time Wheeler has laid his cards on the table and talked the currency down."

The yen strengthened against 13 of 16 major peers. Japan's Prime Minister Shinzo Abe said in parliament today that the need for a fund that buys foreign debt "is becoming a lot less." In last year's election campaign, his Liberal Democratic Party proposed a joint fund operated by the BOJ, the Ministry of Finance and private investors that would buy foreign bonds as a means to end deflation.

Currency Wars

While Group of 20 nation finance ministers vowed to avoid targeting exchange rates, Japan's leaders have pledged steps to boost the economy that caused the yen to tumble. Policy makers in South Korea and the Philippines are weighing curbs to capital inflows while Brazil intervened this month to halt gains in the real. New Zealand isn't a member of the G-20.

The MSCI Emerging Markets Index rose 0.4 per cent. South Korea's Kospi index jumped 2 per cent, the most in five months, and the won strengthened after central bank Governor Kim Choong Soo said the improved global outlook raises the odds that South Korea will beat growth targets. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 1.4 per cent.